American Health Lawyers Association Newsletter | U.S. Court in Kentucky Orders Arbitration of Contract Dispute Between Hospital and Physician

The August 20th issue of Health Lawyers Weekly, a publication by the American Health Lawyers Association features the following interesting case:

A federal court in Kentucky held recently that a physician and hospital must arbitrate their contract dispute and enjoined the physician from proceeding with his state court action against the hospital.

Greenview Hospital, Inc. and Dr. Eric Wooten entered into a purported contract on October 8, 2010. Several months later, Wooten sued Greenview asking a state court to find the arbitration provision of the purported contract void, to enforce the contract, and to award damages for breach.

Wooten also alleged the contract was void as against public policy and was unconscionable.

Greenview subsequently filed the instant action in federal district court seeking to compel arbitration and enjoin Wooten from pursuing his state court action.

Wooten moved to dismiss, or alternatively, to stay the proceedings because of the pending state court action.

The U.S. District court for the Western District of Kentucky found the balance of factors “strongly counsels against staying the case,” citing in particular “the nature of the significant federal rights at issue”—i.e., the Federal Arbitration Act (FAA) and the Anti-Injunction Act.

Greenview argued the court should grant its motion to compel arbitration and enjoin Wooten from proceeding with his state court action.

According to Wooten, however, the contract’s choice-of-law provision required the application of Kentucky law. Because the arbitration agreement was unenforceable under Kentucky law, the court could not compel arbitration, Wooten contended.

Rejecting Wooten’s argument, the court noted Supreme Court precedent finding a general choice-of-law provision does not override an arbitration clause. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995).

Examining the instant contract, the court found as in Mastrobuono, “the choice of law provision covers the rights and duties of the parties, while the arbitration clause covers arbitration, neither [clause] intrudes upon the other.”

Thus, “[w]hile Kentucky law may otherwise govern the contract between the parties, it does not govern the arbitration clause or make it unenforceable,” the court held.

The court went on to find arbitration should be compelled. Wooten did not dispute the existence of an agreement to arbitrate or that the claims raised by both parties were within the scope of that agreement.

The court also enjoined Wooten from proceeding with his state court action, finding such action was not barred by the Anti-Injunction Act and “would serve to protect or effectuate this Court’s judgment.”

Greenview Hosp., Inc. v. Wooten, No. 1:10-cv-00085-TBR (W.D. Ky. July 15, 2010).

Read the full issue here. Find out more about the American Health Lawyers Association here.